ECC rejects hike in sales tax on sugar

ISLAMABAD: The Economic Coordination Committee (ECC) rejected on Tuesday proposals to increase by 25 per cent transportation charges for 400,000 tons of urea imported through Gwadar port and to double sales tax on sugar.

The meeting, presided over by Finance Minister Dr Abdul Hafeez Shaikh, strongly criticised the ministry of industries for using a few selected companies to transport urea from Gwadar to upcountry in violation of Pakistan Public Procurement Authority (PPRA) rules and sought a complete report before the next ECC meeting.

Informed sources told Dawn that Minister for Law and Parliamentary Affairs Babar Awan initiated the criticism of a fellow minister who earlier headed the industries ministry and faced a National Accountability Bureau reference in another case for giving urea transportation contracts after November 2008 to a couple of companies of his choice without inviting open tenders as required by procurement rules.

Mr Awan’s arguments, the sources said, were picked up by Dr Shaikh who made it clear that he would not allow blanket increase in transportation charges and would like to see if PPRA rules were violated in previous transactions. After a heated debate, the ECC asked the ministry of industries to take its summary back and provide information to the ECC about previous transactions.

The PPRA should either be abolished or its rules should be followed, a senior government official quoted Dr Hafeez Shaikh as saying.

The ministry of industries had requested the ECC to increase transportation charges of imported urea from Gwadar by more than 25 per cent to Rs96.20 per bag. The government has decided to import about 400,000 tons of urea for the current Kharif season from friendly countries through Gwadar port.

The import is to be made by the Trading Corporation of Pakistan (TCP) for distribution through the National Fertiliser Corporation (NFC) till December.

The sources said Dr Shaikh also did not accept a proposal from the Federal Board of Revenue (FBR) for increasing the general sales tax on sugar from 8 to 16 per cent within a week of the budget announcement. He said when the proposal had not been made part of the budget the FBR should wait for another three months when the current GST regime would be replaced with value-added tax or a reformed GST scheme in October.

The meeting also deferred the issue of curtailing gas supplies to the fertiliser sector. Some ECC members were of the opinion that a recent reduction of gas supplies for two months of winter in the midst of gas shortages had prompted manufacturers to enhance urea prices by Rs100 per bag. They were of the view that such an option in future would result in import of the expensive fertiliser, which would be unaffordable and hence should be avoided.

The meeting asked the authorities concerned to look into the implications of the proposal and present a detailed report at the forthcoming energy conference.

An official statement said the committee reviewed the sugar stock and decided that the demand of 1.2 million tons will be met through import, as decided earlier by ECC. The meeting formed a committee comprising ministries of Industries and Commerce and FBR to monitor prices of white sugar in the international market.

Discussing the issue of monetisation of Pure Terephthalic Acid (PTA), the ECC decided to withdraw SROs No.1045(1)/2008 and 1299(1)/2008 to enable the government to meet international standards in this regard. However, a summary would be presented at the next ECC meeting suggesting a tariff mechanism, the statement said.